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Taxman flexing his muscles

The South African Revenue Service (Sars) is flexing its muscles to preserve assets to ensure tax collection, a tax expert says.

Arguably the most widely reported preservation order handed down over the past year was for former South African businessman Mark Krok’s assets after a request from the Australian Tax Authority. Assets worth R297 were secured in lieu of a R249million unpaid tax debt.

Madelein Grobler, corporate tax consultant at KPMG, says a court issues a preservation order to prevent a taxpayer from disposing or removing assets.

Grobler says recent preservation judgments are a harbinger of things to come, with Sars under pressure to collect more revenues every year and able to do so thanks to the Tax Administration Act that removed the need for Sars to prove the taxpayer was likely to dispose of the assets.

Sars may now bring an ex parte application (where there is no representation of the taxpayer) "if a senior Sars official believes a taxpayer will remove assets and frustrate its efforts to collect tax”, she explains.

Lesley Isherwood, head of tax technical at KPMG, says whether such an order is granted will depend on the specific facts of each case.

In a recent judgment (CSars v eTradex), the court refused to grant a preservation order because the taxpayer showed steps had been taken to rectify its circumstances that had resulted in non payment of taxes and had offered to provide security for the outstanding tax debts.

Grobler explains that assets may also be seized if a senior Sars official has reasonable grounds to believe that the assets will be dissipated.

Such a preservation order must commence within 24 hours from the time of seizure of the assets, she says.

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.